Question: ProCom Industries operates in several different industries. Total sales for ProCom are $14,000,000, and total common costs are $6,500,000 for 2011. For internal reporting purposes,

ProCom Industries operates in several different industries. Total sales for ProCom are $14,000,000, and total common costs are $6,500,000 for 2011. For internal reporting purposes, ProCom allocates common costs based on the ratio of a segment€™s sales to total sales. Additional information regarding the different segments follows:

Instructions:
1. Compute the operating profit that would be reported internally for each of the four segments.
2. Comment on whether it is appropriate for ProCom to report segment information in the external financial statements using the same common cost allocation method that is used for internalreports.

Segment 1 Segment 2 Segment 3 Segment 4 Other Segments 9% $400,000 Contribution to total sales Costs specific to the segment $,100,000 $1,000,000 $300.000 $880.000 25% 12% 31% 23%

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